Grain Transportation

Analysts Consider That Actual Port Capacity Will Not Be A Problem This Year, As The Real Bottleneck Is In Getting Grain To The Ports As A Result Of  Poor Management Of Railway Logistics, High Cost Of Transportation From Siberian Regions, And Competition With Grain From Kazakhstan (For Markets, For Russian Grain Cars, Etc.). Thus, Russian Railway Officials Complained That In October 2011, Russian Railways Shipped 0.5 MMT Less Grain Than They Could Have If Traders Had Loaded And Unloaded Railcars Faster And Avoided Detention Of Cars. These Delays Are Connected With Inadequate Management And Lack Of Forward Planning, The Poor Conditions Of Grain Handling Facilities At Railway Stations, And Delays In Preparation Of Shipping Documents.

While For Transporting Grain In Trucks The Shipper Needs To Receive Only One Document (Permit) From The State Regulatory Bodies, For Shipping Grain By Rail, The Shipper Needs To Receive Nine Documents From Government Officials, Which Usually Work Only 5 Days A Week. As For The Cost Of Rail Transportation, In Russia Grain Is Considered A Product Of The Second Tariff Group (Not Socially Important, Unlike Ore, Coal And Concrete), And As A Result Freight Rates Are High. Also, The Poor Condition Of The Russian Railway Cars Fleet Is Also A Problem, Although This Situation Has Improved And RusAgroTrans, The Leader In Railway Grain Shipments, Has Been Purchasing New Cars In 2010 And 2011.

At present this company owns 30,000 grain cars, or 90 percent of the Russian grain cars’ fleet, but it has been reported that the company leased out 5,000 cars to Kazakhstan for transporting Kazakh grain to export terminals.

grain transportation

As for trucks, when the grain embargo was introduced many truck companies switched to non-grain cargoes, and when exports renewed they increased transportation fees. Traders complain that in some cases the fees increased by 30-50 percent compared with fees in summer 2010.

The cost of shipping grain from Siberia to European ports is the major constraint for increasing exports of Siberian grain. Siberian provinces produce in average approximately 18 MMT of grain, but domestic consumption of grain in these provinces varies from 11 MMT to 12 MMT. The annual grain surplus may amount to 6 MMT in certain years, however due to the high cost of transportation it is very expensive to ship this grain to export points. The road from the major railway station NovosibirskVostochnyi (Novosibirsk-Eastern) is:

• 5,900 km to Vladivostok port;
• 4,100 km to Novorossiysk port (Black Sea);
• 3,600 km to St. Petersburg (Baltic Sea port)
• 3,330 km to Zabaikalsk (the major border point with China).

According to analysts, the delivery of Siberian grain to export terminals varies from 1,500 rubles ($50 [1] ) to 2,000 rubles ($67) per MT. For comparison, transportation of grain from the Southern European Russia and even from the Volga Valley to the export terminals usually does not exceed 500 rubles ($17) per MT. Also, the returns from grain production in Siberia are lower than in Southern European Russia as input costs are higher and yields are significantly lower. Although quality is typically higher as spring wheat is produced in Siberia, the price premiums for high baking quality of Siberian grain have been very small. This year there is a large grain crop in Siberia, and grain farmers complain that they do not have enough storage capacity to store all grain, given that Siberian elevators still store intervention grain.

grain transportation

Distances from ports and this shortage of storage have dampened domestic prices in Siberia, but even with these lower prices, exports of Siberian grain have not been feasible, although this may change with new railroad tariff decisions (see below).On October 6, 2011, the Russian Federal Service on Tariffs set a temporary 0.5 coefficient to railway tariffs for transporting grain and grain products from Siberia and Kurgan oblast to Russian ports and to the border points with North Korea, China and Mongolia, if the distance exceeds 1,100 kilometers. This coefficient will be in force from September 21, 2011, through June 30, 2012. For transporting grain from Siberia and Kurgan oblast to Ukraine the coefficient will be in force from September 21, 2011 through December 31, 2011. The losses of the Russian state owned railway monopoly “Russian Railways” (RZhD) from this measure will then be compensated from the federal budget, which should be confirmed by a special resolution of the Russian government. Despite this announcement, implementation of these measures can often be delayed by the railroads and can be spotty, and industry analysts have not yet reported significant increase in grain shipments from Siberia to Russian ports or to the Ukrainian border.